Q&A: Competition Commission's supermarket inquiry

The Competition Commission has been conducting an investigation into the grocery market. It will announce its preliminary findings at 7am on Wednesday 31 October. We set out the main issues.

When did the Commission start looking into the issue of the grocery sector?

The current investigation began 18 months ago and the preliminary findings will be released tomorrow. However, the final report will not be produced until next spring.

What are the issues that the Commission is looking into?

The inquiry focuses on the relationship between suppliers and retailers, local competition, and planning issues, in particular land banking - the practice of buying land to prevent competitors from opening a store on it.

What are people hoping to see from the report?

Some will be hoping that the proposals help to break the phenomenon of so-called Tesco towns, under which the supermarket giant has become the dominant retailer in certain areas of the country.

The Federation of Small Businesses claims that the 'big four' supermarkets - Tesco, Sainsbury's, Asda and Morrisons are squeezing out small retailers on high streets across the UK. It wants the Commission to 'seek to re-establish a fair and competitive market'.

Small suppliers have been claiming that they have been coerced into bearing the cost of supermarket price-cutting campaigns. But others believe that competition is on the increase.

Research body Verdict Consulting said that grocery retailers are facing a battle to hold on to increasingly fickle customers.

Has the Commission looked at the issue of supermarkets before?

Yes, during a previous supermarket inquiry back in 2000 the Commission concluded that while the grocery market 'was broadly competitive', it had concerns about the balance of power between suppliers and retailers. It also raised issues about retailers' pricing practices - in particular below-cost selling.

A code of practice was implemented between suppliers and supermarkets. There is speculation that the watchdog will say that the voluntary code of practice introduced in 2000 is not working.

What else is it expected to find?

A: It is expected to accuse supermarkets of building up land banks in a bid to keep rivals out of local markets. It will call for changes to planning regulations to help new stores to open in areas where competitors already have a foothold, and it will also recommend the appointment of an independent ombudsman to protect small suppliers, Sunday newspapers reported.

It is thought supermarkets will be criticised for either holding on to land to stop other retailers developing it, or selling land or stores with so-called restrictive covenants, under which they may not be used by another supermarket.

It is expected to suggest scrapping the 'needs' test, under which supermarkets have to demonstrate that a town requires a new store.

But overall, the report is likely to say that competition in the supermarket sector remains tough, with food prices falling by 7% in real terms since 2000.